UPDATE 2-McKesson to pay $151 mln to states in drug pricing pact

NEW YORK, July 27 (Reuters) - Drug wholesaler McKesson Corp
has agreed to pay $151 million to settle claims by U.S.
states that it inflated pricing information for over 1,400 brand
name drugs.

The settlement, announced on Friday, resolves claims by 30
states under state and federal false claims laws. New York and
California led negotiations for the states and were major
beneficiaries of the settlement.

McKesson, based in San Francisco, said it continues to
believe the claims are without merit.

According to court papers, McKesson marked up prices by 25
percent when reporting to First Databank, a publisher of drug
prices that most state Medicaid programs use to set payment
rates.

"This settlement holds McKesson accountable for attempting
to make millions of dollars in illegal profits," New York
Attorney General Eric Schneiderman said in the statement.

New York will receive $64 million of the $151 million in
restitution, Schneiderman said.

California will receive more than $23 million, according to
California Attorney General Kamala Harris. "We cannot allow
dollars meant for patients to be diverted to inflate corporate
profits," Harris said in a statement.

Illinois will receive $10 million, Lisa Madigan, attorney
general for that state, said in a statement.

McKesson said that it does not set the "average wholesale
price" benchmark used by most states to set payment rates. "We
did not manipulate drug prices and did not violate any laws,"
the company said.

"However, given the inherent uncertainty of litigation, we
determined that this settlement was in the best interest of our
employees, customers, suppliers and shareholders," it said.

McKesson agreed to pay $190 million in April to settle the
federal portion of the Medicaid costs.

Medicaid, a healthcare program for people on low incomes, is
jointly funded by the federal government and states.

Federal and state governments have recovered more than $2
billion from drug companies alleged to have reported inflated
pricing information, U.S. Attorney Paul Fishman in New Jersey,
who announced the federal settlement, said in April.